As a diversified moving and storage operation, you may at times utilize subcontractors to perform part of an office, industrial or commercial move project. If so, provide a proactive review of the subcontractor’s insurance program and require coverage’s designed to protect you from their negligent acts.
Best practices dictate and most contracts will require that your subcontractor’s carry the same coverage (forms & limits) that you as the primary contractor are required to provide. While contracts will vary in size and scope, here is a good basis for review:
Hold Harmless and Indemnification Clause
Include a hold harmless and indemnification clause in your service agreement. In such a clause, your business is not responsible for any losses, costs, damages, expenses, or liability – including Workers’ Compensation – sustained due to negligent or intentional acts. In addition, the clause requires the vendor to indemnify you for any claims pursued against you due to negligence. An example of a hold harmless agreement can be found here: www.thehortongroup.com/resources/hold-harmless-agreement.
While your customer will address the required amount and type of insurance required in the contract, you will need to pass these same requirements on to the subcontractor. Typical requirements are as follows:
- General Liability: $1M per occurrence $2M aggregate
- Auto Liability: $1M
- Carrier Legal Liability: Subject to Contract
- Warehouse Legal Liability: Subject to Contract
- Workers’ Compensation: Statutory
- Umbrella or Excess Liability: $5M
- A.M. Best Rating: A- or Better
- lnsurance Carrier Policyholder Surplus: Level V ($10M to $25M) or better
Additional Insured Status
Your company should be named as an additional insured on the General Liability auto liability and umbrella policies. Gaining additional insured status on the policy will give your company access to the policy for defense and settlement payments. To activate the additional insured status, most policies require a written contract, spelling out this requirement.
Waiver of Subrogation
As the primary contractor, your business should also provide you with a waiver of subrogation on the General Liability and Workers’ Compensation policies. A waiver of subrogation removes the right of recovery against another party. The insurance company is then prohibited from countersuing your company after an unfavorable settlement. For example, a subcontractor’s employee is injured while moving a heavy piece of hospital equipment during the course of a move. With a waiver of subrogation, the subcontractor’s insurance carrier is blocked from seeking recovery against your general liability policy.
Certificate of Insurance
When hiring, proof of insurance in the form of a certificate of insurance should always be obtained. The certificate should show the line(s) of coverage, coverage limits, insurance carrier and special endorsements. Your company’s name and address must be clearly listed on the certificate. Copies of certificates should be obtained and verified compliant by your company prior to the start of any job.
Hiring the wrong employee poses the risk of causing your company significant financial loss. Take precautions by requiring you to meet minimum standards in order to protect your company. Following these important steps will help insulate your company from negligence.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.